WOOD Flash – Europe macro: ECB takes a hawkish turn
At its meeting yesterday (15 December), the Governing Council at the ECB decided to raise interest rates by 50bps, as we expected, but signalled a higher terminal rate than we had envisaged. Additionally, the start of the APP run-off was also announced to begin in March, slightly behind the timeline we had anticipated, but roughly in line in terms of magnitude. With tightening now carried out aggressively, and jointly with interest rates and the balance sheet, we believe a steeper downturn is in the making, which could prove the ECB’s forecast to be rosy. The Council, in our view, is capitalising on the strength of the labour market and is also prepared to accept higher job losses, in exchange for the timely return of inflation back to the target. With the renewed guidance, we now expect two further 50bps increases in March and May, raising the terminal refinancing rate (MRO) to 4.00%.
WOOD & Company is the leading investment bank in Emerging Europe. Founded in 1991 and head-quartered in Prague, our footprint spans the region and touches investors around the globe.
A pioneer in Emerging Europe, WOOD executed many of the first CEE equity trades and landmark investment banking transactions. Our electronic trading platform was the first in the region, and remains the best. We are continually expanding our relevance and reach in these ever-evolving markets.
Our equity market share reflects our stature: 7% in Warsaw, 20% in Bucharest, 16% in Hungary, 40% in Prague and 5% in Vienna. Our distribution is unparalleled, with the largest salesforce in the region, servicing a uniquely diverse investor base.
We couple local expertise with a truly international perspective. With offices on the ground in the region, and in key financial hubs such as London and Milano, we are never far from our clients and we remain at the forefront of what’s afoot in the CEE emerging and frontier landscape.
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